Reving up Direct Marketing Campaign for 3+ unit apartm & SFRs

[Will F.]

First off I'm in Los Angeles and I'm trying to purchase these houses to flip and apartments for buy and hold. I've had a decent amount of success buying and holding (SFR-apts) as well as flipping. Everyone here knows we're in a hot market, MLS houses sell for $450-800k retail in the areas I'm searching. I'm looking for 70% ARV deals (in general)

I've had mail campaigns years ago only to have them sour out (I admit a lot of them I just didn't follow up on because I got into another project-like a large scale flip/rehab/dev). I've also done a lot of driving for dollars and door knocking, especially in the neighborhoods where I flip. For instance a few years ago I had house flip in Northeast LA that I purchased off the MLS for mid 3s and resold in high 5s, which was my largest margin SFR flip to date. Since then I've bought some value ad apartments, doing a few more flips, B&H, which are overall doing well, but have also been a pain in the rear.

I'm finding the margins just aren't there especially for any distressed properties on the MLS. These distressed properties are selling for like 90% of ARV making there zero margin for fix/flip.

Do any locals have advice who do direct marketing, D4D, off market deals?  

One issue I've had in the past is I have issues with coming off like I'm a vulture or con man.  I obviously don't want to do that, I just want to purchase distressed properties, put in the construction costs and make some sort of margin...in this difficult market.  

In the past I've met with owner/sellers just haven't had many convert to a purchase.  Some I've just ended up giving the owner advice and suggested they short sell or do a loan modification, because it didn't make sense for me to buy it with their numbers.  This took a lot of my time and time's money!

Out of thousands of mailers, dropping off letters on doors ,yellow letters, business cards, post cards, EDDMs, and occasional door knocks [i am kinda a shy person so this is only if I'm in the mood or feeling esp driven ;-)]) 

I just haven't had much success at direct marketing. My direct mails in Los Angeles and Long Beach tend to have a response rate around 1% or perhaps less. Most of my deals have come from real estate agents (distressed properties, or short sales), network, or straight off the MLS.

Perhaps I need to scale the direct marketing up?  

Anyone in LA or OC coastal area just doing volume direct marketing and killing it?

  I'm just afraid of wasting more money on something that I'm not even sure works... or that I'm just totally messing up on. Or perhaps it is true that the coastal Los Angeles market is too saturated.  The margins don't seem to be there.  I don't think this is a bubble, but real estate here is getting unaffordable--that being said the demand is there and always will be in Coastal CA.  I understand that it could be my negotiation or meeting with sellers that is the problem as well.  Perhaps I need to change markets to out of state, or perhaps more inland.  

Despite my last paragraph about the pessimism of direct marketing, I'm always willing to try different things if the opportunity is there.

[Ray Lai]

hey @Will F.

Very familiar with the issues you're facing. SoCal and LA are high competition areas where there are true professional wholesalers that have better lists and they market with focus and dedication over long periods of time. The problem is that people mail to the same lists and expect high response rates (listsource is heavily used) and don't follow up enough. The large wholesalers spend minimum 5 digits in hot markets where the profits are good like SoCal... one deal is so profitable like you've experienced that people ramp up the marketing efforts.

Buying at 90% ARV from delusional sellers when hot foreign money that needs to be laundered is flooding your market makes profitability difficult and wastes a lot of time chasing the deals that everyone sees on MLS.

Our company partnered up with a company that gets their lists in a more unique fashion than what is typically mentioned here and offer that to our clients for their mailing so they get better responses.

It's better to dominate in a smaller market, than be a small fish in a competitive market is what I believe and what others have said as well in the podcasts.

Even though our company offers direct mail and I've hooked people up, I think you need to re-visit your strategy and think about what you can do differently to improve the quality of your lists before mailing. Also you need to be able to sustain your campaign because it's great that you recognized in the past you stopped when you got a deal, which is a big no no as deals are the lifeblood to our industry. Or if you are just awful at finding deals, you could always use a pro wholesaler and focus on the value add of flipping if that's where your expertise lies.

It's important to take a look at what your strengths are. You don't need to do every part of the value add in the real estate chain, it's quite inefficient and not very feasible in a competitive market when you're small. It's better to focus on one part of the value add and do that extremely well and partner up with other local players you meet at your local REIA meetings.

Does that make sense?